# Product Costing & Pricing

> Product costing calculates the full cost of each product — materials, labour, overheads and selling costs — so prices, discounts and product mix decisions are based on real margins. Standard costing sets expected costs and tracks variances; activity-based costing allocates overheads by the activities that drive them, often revealing that some 'best-sellers' lose money.

Practice: CMA & Cost Accounting — https://www.industax.com/services/cma-cost-accounting/

Many SMEs price on gut feel or competitor prices. A costing model shows the contribution of each product and the volume needed to break even, which changes negotiations with customers and suppliers.

We build the model from your actual data and integrate it with your accounting or ERP.

## Key facts

| Item | Detail |
| --- | --- |
| Methods | Standard, job, process, activity-based costing |
| Outputs | Unit cost, contribution, break-even |
| Used for | Pricing, product mix, make-or-buy |

## Who needs this

- Manufacturers with many SKUs
- D2C brands with thin margins
- Businesses quoting custom jobs

## What's included

- Cost model
- Margin and break-even analysis
- Pricing recommendations

## Documents

- Bill of materials
- Production and labour data
- Overhead ledgers

## Process

1. **Collect** — Cost data gathered.
2. **Model** — Product costs computed.
3. **Decide** — Pricing and mix actions.

## FAQs

### What is the difference between marginal and absorption costing?

Marginal costing treats only variable costs as product costs, which is useful for pricing decisions; absorption costing includes a share of fixed overheads, which is used for inventory valuation and financial statements.

### How often should costs be updated?

At least yearly, and whenever material prices or processes change significantly.

### Can costing help with GST and inventory valuation?

Yes. Accurate costs support inventory valuation in the books and valuation of stock transfers between GST registrations.

## Official sources

- Institute of Cost Accountants of India: https://icmai.in/

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Canonical page: https://www.industax.com/services/cma-cost-accounting/product-costing-system
Publisher: Indus Tax — CA-led tax and compliance firm (https://www.industax.com). Contact: info@industax.com, 9059139258.
This is general information, not advice for your specific facts.